Yesterday, President Donald Trump issued an Executive Order announcing the implementation of the United States-Japan Agreement on Reciprocal Trade, which the White House announced will impose baseline tariffs on Japanese imports into the United States and otherwise alleviate market access in key sectors for both countries.
The terms of this deal take effect the day of publication in the Federal Register, anticipated next week, and apply retroactively to products of Japan entered for consumption or withdrawn from warehouse for consumption on or after 12:01 a.m. Eastern Daylight Time on August 7, 2025.
While the Agreement generally reduces tariffs or substantially eliminates them on “products of Japan,” it further allows the Secretary of Commerce to establish rules for determining what are “products of Japan.” This guidance may take the form of “rules, regulations, guidance, and procedures.”
Key Provisions for Both Nations
Under the Agreement, the United States will apply a 15 percent “baseline” tariff products originating from Japan, subject to certain exceptions outlined below. The U.S. will also treat imports of automobiles, auto parts, and aircraft and aerospace products differently than other products, and exempt certain “products of Japan” that are pharmaceuticals or natural resources unavailable generally, or at sufficient scale, to satisfy domestic demand in the United States.
In exchange, Japan has committed to expand market access for American industries, including manufacturing, aerospace, agriculture, energy, and automotive sectors. This commitment includes a 75% increase in U.S. rice imports under Japan’s Minimum Access scheme, as well as annual purchases annual purchases of American agricultural products such as corn, soybeans, fertilizer, and bioethanol, totaling $8 billion. Japan will also streamline approval for U.S.-made passenger vehicles, and has committed to purchasing U.S.-manufactured commercial aircraft and defense equipment. Japan has also pledged $550 billion investment in the United States. The Order explains that this investment will be “directed” by the U.S. government with an aim to create jobs, boost domestic manufacturing, and strengthen long-term American economic prosperity.
Similarities to Prior Trade Deal Frameworks — and Variations on Themes
Several of the key provisions laid out in the Agreement mirror provisions from other Trade Agreements. As was implemented in the EU trade deal, the reciprocal tariff rate for goods originating from Japan will depend on the regular customs (Column 1 (MFN)) duty rate for the specific classification. For goods with a Column 1 duty rate equal to or lower than 15%, the reciprocal tariff rate would be 15% minus the Column 1 duty rate. If the Column 1 duty rate is higher than 15%, then the importer pays the Column 1 duty rate, and no additional reciprocal tariff is applied. To be sure, the White House additionally noted that any treatment of specific or compound duty rates shall be identical to the treatment provided to products of the European Union as outlined in Executive Order 14326 of July 31, 2025 (Further Modifying the Reciprocal Tariff Rates).
Additionally, as was provided in the U.S.-UK trade deal, products of Japan that fall under the WTO Agreement on Trade in Civil Aircraft (e.g., civil aircraft; civil aircraft engines; other parts, components, or sub-assemblies of civil aircraft; and ground flight simulators) will be exempt from IEEPA Reciprocal Tariffs and tariffs imposed pursuant to Section 232 of the Trade Expansion Act of 1962 (Section 232) on steel, aluminum, and their derivatives.
Unique to the Agreement with Japan, however, is the specific reduction of Section 232 duties on automobiles. Similar to the methodology for reciprocal tariffs, the specific Section 232 duty rate for automobiles and auto parts will depend on the regular customs (Column 1 (MFN)) duty rate for the specific classification. For goods with a Column 1 duty rate equal to or lower than 15%, the 232 autos rate would be 15% minus the Column 1 duty rate. If the Column 1 duty rate is higher than 15%, then the importer would pay the Column 1 duty rate, and no additional 232 duties would be owed.
That said, what is not included in the Order is a similar tariff reduction to other products that would be classified upon importation into the United States in a Harmonized Tariff Schedule subheading listed on other Section 232 measures most notably steel and aluminum, or any forthcoming measures on semiconductors and timber derivatives.
Inclusion Process for 0% Tariffs on Certain Japanese Goods?
In addition to the foregoing general and sector-specific tariff reductions, the agreement reduces to zero percent products of Japan that are natural resources unavailable (or unavailable at sufficient scale to satisfy domestic demand) in the United States, generic pharmaceuticals, generic pharmaceutical ingredients, and generic pharmaceutical chemical precursors. In determining the goods that qualify for this duty reduction, the White House announcement confers sole authority to the Secretary of Commerce. To be sure, the language of the announcement is broad and contemplates that the Secretary of Commerce may take action to reduce to zero percent tariffs imposed pursuant to IEEPA as well as Section 232 by reference to the “national interests of the United States” and “the scope and nature of the commitments of the Government of Japan.”
Reading between the lines, there may exist an opportunity to seek tariff reductions on products or machinery needed by Japan to meet the pledged $550 billion in foreign direct investment.
That said, the agreement also entrusts the Secretary of Commerce with monitoring the commitments by the Government of Japan under the Agreement and allows the President to modify the Order if there is a failure to abide by such commitments.
Impact on Other Trade Agreements
In looking forward to other trade agreements that have yet to be finalized, it is reasonable to expect similar structures to the trade deals announced so far that have featured a particular baseline tariff combined with certain sector specific tariff reductions in exchange for trade liberalization in foreign market access for U.S. exports. The precise details of each agreement will continue to be negotiated by the United States and its trading partners. So far, each of the technical details has tracked with announcements of agreements in principle, but these technical details further expand on certain liberalization in certain sectors important to each individualized trading relationship.
Adjusting Supply Chains and Negotiating Settlements
The attorneys, licensed customs brokers, compliance professionals, economists, and trade specialists of Cassidy Levy Kent regularly assist companies in evaluating their supply chains to ensure compliant market access and adjust for tariff-related developments, both mitigating burdens and taking advantage of opportunities. Cassidy Levy Kent also leverages its thorough understanding of relevant legal regimes to advise governments on tariff policy and procedures.